YFI reaches $38,800 and reaches a $1 billion market cap – Will it continue to grow?

7. September 2020

YFI, the yearn.finance’s native token, has grown by more than 75% in the last 24 hours, reaching a new all-time high at Binance at $38,883 in the pair with USDT. The strong bullish movement has also pushed the market capitalization of the DeFi token to over $1 billion.

Traders are enthusiastic, but YFI might be overestimated

The general opinion of the participants in Decentralized Finance (DeFi) towards YFI still seems to be positive. Ian Lee, general manager of IDEOVC, identified the frequent product launches by yearn.finance developer Andre Cronje as a positive long-term catalyst for YFI.

In the past month, Cronje has introduced several products, including yinsure.finance. Many investors, including Fred Ehrsam of Paradigm, underlined the potential of DeFi insurance, which could evolve in the next big market.

According to Lee, the rapid development of new products, as well as the active community of yearn.finance, are giving strength to YFI’s upward trend:

„We are witnessing something even bigger. Thanks to Andre Cronje’s speed of development and launch, YFI is the fastest-evolving self-valorizing/innovative asset ever, period.

In the long term, some analysts believe that the valuation of yearn.finance could reach several billion dollars. The definitive bullish perspective, proposed by analyst Tyler Reynolds, suggests the possibility of a $15 billion market cap based on a cash flow analysis:

„$YFI at $500,000 = market cap at $15 billion. If it reaches a FCF (free cash flow) 50 times larger, it will have to generate $300 million for its holders. It is already generating $20 million and the figure will increase with the growth of yUSD/yCRV. By adding more arbitrage opportunities and new products (e.g., insurance) we are not far from $300 million in FCF“.

However, there are several risks lurking in YFI’s long-term trend. The most obvious is yearn.finance’s strong dependence on its core developer. Cronje is under considerable pressure to constantly release new products and functionality.

Like all DeFi tokens, there is also the risk of a drop in yields. If the overall yield of the DeFi market decreases, the demand for YFI and yearn.finance could follow the same direction. The biggest threat to yield in DeFi is the price of Ether (ETH). If the cryptocurrency is in continuous decline, causing the governance tokens to collapse as a result, the yield could fall drastically.